206 Disqualification and removal of liquidator

Disqualification and removal of liquidator

Depending on the circumstances, a liquidator can be made the subject of a disqualification order. They are:

1. Disqualification on conviction of indictable offences.

2. Disqualification for persistent default under the Act.

3. Disqualification for fraud, etc, in winding up.

A liquidator could be made personally liable for company debts if he/she had knowingly carried on the business with intent to defraud creditors of the company (Section 304).

The liquidator also has a role in the prosecution of delinquent officers and members of the company (Section 306). He/she is also obliged to report the matter to the Minister and to furnish certain information or documents as the Minister may require (Section 306(2)).

A liquidator may be removed if it is in the opinion of all those who are interested in the company being liquidated. However, if the applicant seeking to remove the liquidator had not shown that all the contributories and creditors supported his/her application, and there was no cause shown by the applicant warranting the removal of the liquidator, the court will dismiss the applicant’s application to remove the liquidator with costs.

The appointment of a liquidator is personal in nature. The individual liquidators so named are in a quasi-trustee position vis-à-vis the contributories and the firm where the liquidators are from is a separate entity, e.g., not the company’s liquidators.

The court has a duty to protect the liquidator from spurious or vexatious litigation in order to preclude unwarranted and wrongful interference with the windingup process in deciding on whether or not to take commence legal action against
liquidators. Parties who make such applications should show sufficient merits and each case shall be evaluated and analysed on its own facts. Mere assertion of breach of fiduciary duty and/or fraud, premised on the allegation that the liquidators acted
in conflict of interest, is insufficient.